The Department of Health and Human Services (HHS) has initiated a significant funding freeze, withholding $10 billion in federal funds from five states run by Democratic governors due to allegations of fraudulent child-care programming. An HHS official confirmed this development to ABC News, identifying the states affected as California, Colorado, Illinois, Minnesota, and New York.
This funding freeze is expected to severely hinder families in these states at the start of the new year, potentially leading to long-term implications for low-income families already grappling with an ongoing affordability crisis, as highlighted by recent economic data. The spokesperson for the health department stated that for too long, Democrat-led states have turned a blind eye to rampant fraud occurring under their jurisdiction. The administration aims to ensure that federal taxpayer dollars are allocated for legitimate purposes only.
A senior official from the Trump administration pointed to rampant fraud as a primary reason for freezing the child-care programs, claiming that funds were being misallocated to undocumented immigrants. However, the department has not provided concrete evidence of fraud pertaining to all the states affected, primarily citing allegations from Minnesota child-care centers. Instances of alleged fraud have also been reported in New York, Illinois, and California, although ABC News has not been able to independently verify any claims regarding fraudulent disbursements to undocumented individuals.
The federal actions were prompted by an unverified online video posted by conservative influencer Nick Shirley, which accused child-care services in Somali communities in Minneapolis of fraudulent activities. Minnesota officials have disputed these allegations, which have gained traction amid ongoing investigations into child-care fraud within the state. Over the past couple of years, federal charges have revealed that at least 70 individuals participated in a wide-ranging criminal conspiracy that exploited federally funded nutrition programs, fraudulently obtaining over $250 million—one of the largest COVID-era fraud schemes in the nation. The defendants allegedly used a Minnesota-based nonprofit, Feeding Our Future, to shield their activities from scrutiny.
Recently, the Trump administration paused payments from the Child Care and Development Fund, which serves as the primary federal source for child-care assistance, affecting all states. Andrew Nixon, a spokesperson for HHS, confirmed this development, noting that the new funding freeze builds on an existing halt in Minnesota. ABC News has reached out to HHS for more details regarding the funding freeze that impacts child-care centers across the five states.
In light of these allegations and the funding freeze, Minnesota Governor Tim Walz announced that he would withdraw from his reelection bid to focus on defending the state against fraud allegations. Meanwhile, President Donald Trump stated on social media that an investigation into fraud in California has begun, asserting that the state, under Democratic Governor Gavin Newsom, is more corrupt than Minnesota. In response, Newsom labeled Trump a "deranged, habitual liar," arguing that the president's claims are disconnected from reality.
New York Governor Kathy Hochul described the funding cuts as an "impending threat" to her state, accusing the Trump administration of launching a "frontal assault" on children. During a recent news conference, she questioned why the administration is targeting child care resources. Hochul emphasized that New York has not yet received official notification of funding being withheld but pledged to fight any such actions in court, stating, "We will fight this with every fiber of our being."
Similarly, the Illinois Department of Human Services indicated that it had not been contacted regarding the funding freeze. Colorado officials also reported no official notification of any changes to funding sources, expressing concern over the potential impact on families who rely on these resources for food and other essential needs. A spokesperson for the Colorado governor's office remarked, "If true, it would be awful to see the federal government targeting the most needy families and children this way."
This funding freeze raises significant concerns regarding the future of child-care programs in these five states, highlighting the intersection of federal oversight, state governance, and the critical need for child-care resources amid an ongoing economic crisis.